Investment Loan vs. Owner-Occupier Home Loan

• Investment Loan
  • Designed for purchasing a property to rent out to tenants and generate rental income.
  • Often have higher interest rates and stricter lending criteria than owner-occupied loans.
• Owner-Occupier Home Loan
  • Intended for purchasing a home to live in as your primary residence.

Tips to Buy Multiple Investment Properties

• Leverage Your Equity
  • Use the equity in your home to help you buy several investment properties.
  • Access the equity through a home equity loan or a cash-out refinance.
• Increase Your Savings
  • Save the excess rental income to fund your next investment property purchase.
  • Aim for positive cashflow on your first rental properties.
• Increase Your Borrowing Power
  • Avoid personal loans, car loans, or leases as they can reduce your borrowing power.
  • Reduce your credit-card limit and close out cards that are no longer in use.
• Choose The Right Lender
  • Consider other lenders who might offer you a better deal or more borrowing capacity.
  • Be aware of the pros and cons of borrowing from the same lender versus a different lender.

Is it Worth Buying an Investment Property?

• Stable Investment
  • Property markets have proven to be less volatile than others.
  • You have a good chance to benefit from capital growth if you buy at a good price.
• Positive Cash Flow
  • Rental income can cover your monthly mortgage repayments, generating positive cash flow.
• Tax Benefits
  • Potential tax benefits from negative gearing and other deductions.
• Physical Asset
  • Property is a tangible asset that you can see and touch.
• Build An Investment Portfolio
  • Properties can increase in value and improve your cash flow over time.

Drawbacks to Buying an Investment Property

• The Disadvantages of Negative Gearing
  • Negative gearing strategy tends to work only if you have a stable job with an increasing income.
• Low Liquidity
  • Property investments are not easily liquidated and can take months to sell.
• Not All Properties Increase in Value
  • Your investment property may decline in value over time or due to market fluctuations.
• High Entry Costs
  • Costs include deposit, stamp duty, legal charges, and real-estate agent’s fees.
• Difficult Tenants – Or None At All
  • You could end up with problematic tenants or without tenants, covering the cost of the property yourself.

How Much Can I Borrow?

• Borrowing Power
  • Depends on the strength of your loan application.
  • You may be able to borrow up to 85%, 90%, or more than 90% of the property value depending on your financial situation.

How Can I Qualify for an Investment Loan?

• Requirements
  • Sufficient deposit, genuine savings, clean credit history, strong income, and stable employment.

Is Buying an Investment Property Before Your First Home a Good Idea?

• Considerations
  • Housing affordability, leveraging property price appreciation, and making loan repayments via rental income.
  • Be aware of the drawbacks such as paying both rent and mortgage, investment risks, and significant costs.

Tips for RenTvesting

• When buying an investment property, your primary goal could be to live in your preferred location while gaining a foothold in the property market. You can benefit from an investment property through capital growth, manufactured growth, or positive annual cash flow. The first step is to decide your objective: capital gain, manufactured growth, or cash flow.
• Consider factors like location, property condition, capital growth potential, manufactured growth potential, rental yield, tax benefits, negative or positive gearing, and capital gains tax. Thorough research and planning will help you make informed decisions and maximise your returns.
• To maximise return on investment and negative gearing benefits, rent with other people. Paying less in rent while investing in an area with a good rental yield puts you in a better position to profit.

Property purchasing costs

• Minimum of 5% deposit
• Stamp duty
• Property title transfer fee
• Registration fees
• Conveyancing fees
• Inspections including building/strata and pest
• Home loan set up fees
• Lenders Mortgage Insurance (LMI)

Property selling costs

• Agent Fees
• Marketing Costs
• Conveyancing Fees
• Capital Gains Tax (CGT)
• Presale Repairs and Renovations
• Styling/ Home Staging
• Auctioneer’s Fees
• Lender Fees
• Moving Costs